That will not buff out. Looks as though the major part of the hub is OK....just the sprocket carrier is toast. Might be able to reinforce the swingarm with a plate or 2 but how much do you want to trust it after rewelding it? Not sure if the arms on these bikes are stress relieved and heat treated after they are assembled in the first place.

I remember that happening on an IT175 of mine, but with a steel swingarm it was a lot less damaging.